The prepayment customer invoice feature in D365FO version 10.0.41

In D365FO version 10.0.41 a new preview feature is available, the 'Prepayment customer invoice feature':

This prepayment invoice functionality can be used to issue the customer a prepayment invoice before the goods or services are delivered. Sales tax is included on the invoice when needed. The goods or services will be delivered when the prepayment is received and prepayments can be applied to the final invoice including automatic settlement.

In this article I describe the setup and the process including an example.

Setup

When the feature is enabled, a new option will become visible in the Inventory Posting profile. on the 'Sales order' tab the new posting type 'Customer Prepayment' becomes available:

On this posting type you can enter a (new created) main account for customer prepayment revenue.

In the Accounts Receivable parameters you can select if the sales order confirmation is needed to be able to create the prepayment invoice:

In my case I have not selected this parameter, so I can use the prepayment functionality without confirming the sales order.

In the Accounts Receivable parameters on the 'Ledger and sales tax' tab, you can find the new field 'Prepayment Application policy' with the values 'Notification' or 'Automatic':

When the option Notification is selected, prepayments are applied manually to the final invoice. With the option Automatic selected, prepayments are applied automatically to the sales order if the full payment is received with settlement of the prepayment invoice.

The process automation 'Background processes' will be used for the automatic settlement posting between the applied prepayment(s) and the final invoice:

Number sequences from scope company are needed for four new number sequence references:

Also you have to create at least one sales category for the revenue account used in relation to the prepayment:

Creating one or more sales categories is depending on how many main accounts you want to use for the prepayment values. In the posting profile when needed you can split these main accounts based on the sales category:

The process

Looking to the process, in basis four steps needs to be done:

1. Add prepayment to sales order
2. Confirm and post prepayment invoice
3. Settle prepayment invoice with payment when customer has paid
4. Apply prepayment invoice to final invoice

To add the prepayment to a sales order, at the top of the form go to the tab 'Invoice' and select the option 'Prepayment proposal':

Be aware: at the moment that I describe this option, these fields only become available in the sales order details form, not in the sales order list page!

In the prepayment form that opens, when needed click on edit to create the prepayment and select the prepayment type 'Percent' or 'Fixed' and the corresponding prepayment 'Sales category':

In this case if you select the prepayment type 'Percentage', in the field 'Prepayment value' you enter the percentage of the prepayment which will end in a calculated 'Total prepayment amount'. But in my case I will use the 'Fixed' prepayment type of USD 300,- as mentioned above.

Because of the saved prepayment proposal, on the sales order it will be possible now to select the 'Prepayment invoice' option:

When clicking on this option, the prepayment invoice form opens. Here you can review the proposed information and click on 'Post' when the prepayment can be posted:

In the voucher of the prepayment invoice you can see that the customer balance from the customer posting profile and the prepayment revenue account from the inventory posting profile are used:

On the sales order, you can find the posted prepayment invoice which will have the status 'Pending' now:

Now when the prepayment is paid by the customer, the payment can be settled with the prepayment invoice:

After posting the payment of the prepayment, the status of the prepayment invoice on the sales order is changed into 'Received':

Now on the sales order you can go to the option 'apply prepayment':

Here you can select and apply the prepayments that must be applied to the invoice that will be created:

Now when you generate the final invoice, on the new tab 'Prepayment invoice' the prepayment amount is applied to the invoice:

When posting this invoice you will see the following transactions on the customer:

So at first the total amount of the final invoice will be the open balance of the final invoice posting. The applied prepayment is not deducted from the balance of the final invoice. When the earlier activated background task in the process automations has run, the prepayment invoice will be reversed. Settlement of the prepayment invoice reversal will be done with the original prepayment invoice and settlement of the payment transaction of the prepayment invoice will be done with the final invoice:

Using Electronic Reporting

To print the prepayment invoices with Electronic Reporting, make sure you have imported the 'Customer prepayment invoice model' files from Electronic Reporting:

When finished, in the Accounts Receivable parameter form, you can add this Prepayment invoice configuration in the new field 'Prepayment invoice':

This Electronic Reporting file is not mandatory to use the prepayment functionality, but needed if you want to use Electronic Reporting to sent the prepayment invoice.